Winding-up petition extension to give businesses “much-needed breathing space”

Amid a much-feared second wave of coronavirus cases across the UK, the government has amended the Corporate Insolvency and Governance Act to extend the suspension of statutory demands and winding up petitions until 31 December 2020. Originally due to expire on 30 September, this measure means that companies will benefit from additional protection against creditors for the remainder of the year.

Earlier in September, the government also extended its commercial eviction ban (again until 31 December) to protect businesses who are continuing to struggle with rent payments from being evicted from their premises.

What does it mean for businesses?

Essentially, businesses who are struggling to pay their creditors will continue to be protected against the presentation of statutory demands or winding up petitions until the end of the year, in an attempt to protect as many companies as possible from insolvency. Landlords will also be unable to commence eviction proceedings, or forfeit a lease, for non-payment of rent during this time.

The measures outlined in the Corporate Insolvency and Governance Act also include a ban on termination clauses, which has been further extended until 31 March 2021. Termination clauses prevent suppliers from stopping their supply or demanding additional payments while a company is undergoing a rescue process.

Interestingly, the measure suspending company directors’ personal liability for wrongful trading was not extended.

What does it mean for creditors?

The extension of the above measures inevitably places creditors in a difficult position, as many will be experiencing cash flow problems of their own. Without recourse to statutory demands and winding up petitions what can be done to recover your money at this difficult time?

Well, there are still some options open to you, such as a standard court claim and enforcement of a County Court Judgment e.g. by way of third-party debt order, a  charging order against a debtor’s property,  or instruction of a High Court Enforcement officer to seize debtors’ assets to the value of the judgment. These are not “quick” solutions and you will need to decide whether incurring these costs is likely to result in a financial return. i.e. is your debtor a “can’t pay” or “won’t pay debtor”? We would always recommend considering the enforcement options before issuing a claim.

Seek legal advice

Whether you’re owed money or are unable to pay your debts, our lawyers can provide sound legal advice and help you find a way forward. It is likely that there will be a significant backlog of winding up petitions in the first few months of 2020, so it’s wise to seek advice on how to minimise delays if you’re a creditor. Likewise, your business may continue to struggle even after the temporary restrictions end on 31 December, so if you owe money it’s important to prepare yourself for the possibility of legal action.

-Maria Koureas-Jones 

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